Abstract
This paper investigates a finite replenishment inventory model in which the demand of an item is a deterministic function of price and advertising expenditures. The formulated models also incorporate learning effects and the possibility of defective items in the production process. A general solution methodology is developed to determine the optimal lot size, price mark-up, and advertising expenditure simultaneously. This method utilizes separable programming resulting in an effective computer technique to find the global optimal solution. Closed-form solutions are found for special cases.
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